Market Update March 11th, 2020

Are we there yet?

Maybe not quite yet, but we should be close.

Markets were spooked further today by the World Health Organization declaring Coronavirus a pandemic, and saying it is deeply concerned by the spread and severity of the virus.    

Today’s sell-off then worsened as the media circulated reports that Goldman Sachs chief U.S. equity strategist David Kostin wrote this morning that he believes the S&P 500 bull market will soon end, and he cut his mid-year S&P 500 forecast to 2450, which is about 11% below where it closed today. However, what I didn’t hear in those sound bites all day is what Mr. Kostin wrote in the rest of that update, where he said his year-end 2020 S&P 500 forecast is 3200, which is 16.7% above where it closed today.

Of course nobody knows for sure how much further this Coronavirus will spread, how long it will last, or what the total economic impact will actually be on the U.S. and global economies. And markets hate uncertainty like that. The only thing we’re confident in is that it will be temporary, and that stocks should stage a powerful recovery once Coronavirus fears fade.

While the Coronavirus outbreak is still spreading in the U.S. and many other countries, we are encouraged to see the current active Coronavirus cases in China continue to decline at a rapid pace, from a high of 58,000 actively infected in mid-February to just under 15,000 actively infected today, as recoveries continue to outpace new infections. South Korea also now appears to be reaching a positive turning point as their number of daily new active cases has been consistently falling this past week, from a high of 851 on March 3rd, to 165 reported yesterday, and just 35 new cases today. They seem to be following a trend similar to China.

First Trust’s Chief Economist Brian Wesbury said today that based on stock market and treasury yield declines since this correction began, he calculates that the market is now pricing in about a 79% drop in corporate earnings this year. He said during the Great Recession earnings fell 46%. Pricing in worse than 2008!

As always, we urge you to call us if you become overly concerned, or of course if there are any material changes to your financial situation that we need to know about.  

Hang in there!